Below is the text of Mr Major’s speech to the European Policy Forum on 27th July 1994.

PRIME MINISTER:

THE ROLE AND LIMITS OF THE STATE

The party I lead has always been a party of change and reform. But we're a conservative party. Our instincts are for stability. We are wary of schemes to uproot what is familiar. So in discussing the role and limits of the state I am not going to unveil some new constitutional blueprint. I don't think this country needs politicians throwing the British constitution up in the air to see how the broken pieces fall.

Today, we are opening up the map of how Britain is governed. It's a big agenda, dwarfing any changes we've seen since the modern pattern of government was established. Times change; needs change. But change must come against a stable background.

So you will find me wary of change in the basis of our constitutional settlement - the Union between England, Scotland, Wales and Northern Ireland; wary of new voting systems. You will find me opposed to those who think that national identity must be suppressed in the interests of political progress. I strongly reject that view. The nation state is the greatest fixed point in our political firmament. You cannot suppress the individualism of an island race. We are content to build on consensus and co-operation, unwilling to accept centralism and direction.

In my first speeches as Prime Minister I placed wider personal ownership and higher quality in public service at the heart of our objectives for the 1990s. In 1991, I called for a revolution in ownership. I said then:

"I want to give individuals greater control over their own lives. For every family, the right to have and to hold their own private corner of life; their own home, their own savings, their own security for the future. Building the self-respect that comes from ownership, and showing the responsibility that follows from self-respect: that is our programme for the 1990s. I will put it in a single phrase; the power to choose - and the right to own."

Conservatives have always stood for ownership. As well as ownership of property we need ownership of the important decisions in our own life. Which school for our children? What skill training for ourselves? What pension provision for our retirement? These are decisions for individual adults. To deliver these choices, I believed we needed a second revolution - in the way public services are delivered.

As a councillor in Lambeth 25 years ago, I saw the alienation between bureaucracy and people, and I didn't like what I saw. So in 1991, with the Citizen's Charter, I launched a long-term programme to make services much more responsive to the people who use them.

In the past four years much has been achieved in making government more accountable and in raising the quality of service. We are pursuing change not for the sake of change, but change for the sake of people. And today, as a result, when people want to learn something about reinventing government, they come to Britain to do so.

The role of government

Ownership and choice are essential to put power in the hands of people rather than government. The longer I've been Prime Minister, the more certain I've become that government should be wary of interference, and aware of its limitations.

Over the years, the role of the state grows almost imperceptibly unless it is deliberately kept in check: a little subsidy here, a bit more regulation there, another Directive just there. We can no more stop fighting the battle against "big government" than the gardener can stop mowing the lawn or digging out the ground elder. We must resist the clamour for government action, magnified by pressure groups, on almost every item of news. It is one of the greatest follies of the late twentieth century.

In the 1980s, Margaret Thatcher began to roll back the frontiers of the state, with privatisation, deregulation and the restoration of personal incentives. We have cut back state-owned industry by two thirds. Price controls, dividend controls, exchange controls have faded into history. So have income tax rates of 83p and even 98p in the pound.

But more is needed. For example, we did not manage to stem the tide of European regulation during the 1980s. Now we have put up breakwaters: the principle of "minimum interference" we secured at Maastricht; and, of course, our opt-out from the Social Chapter, enshrined in a legally-binding protocol. With the German government, we are working to reduce regulations across Europe.

The tide is turning. The number of proposals for new directives tabled by the European Commission has fallen from 185 in 1990 to some 25 so far this year. The Commission has acknowledged that one quarter of its statute book needs to be revised or repealed.

At all levels my ambition is smaller government, efficient government, effective government, responsive government. When we say this, some ask if it is our ambition all but to abolish government. My response is no. I do believe that government has a vital, indispensable role to play. But I also believe strongly that the role of the state should be more limited.

We see economic growth as the opportunity to reduce the public sector's share of national income. Others take a different view. When they talk of using growth to pay for their pledges, they mean quite the reverse: expropriating the benefits of growth from those who created it. The second key difference, of course, is that we understand how that growth is created: and that if you plan to pay for your promises out of other people's efforts, you are likely to find they down tools.

So we see personal incentives as the key to growth; and growth as an opportunity to reinforce them - at all levels. I am glad that even in our recent difficult budgets, we were able to widen the band of income across which the taxman may only take 20 per cent. When we can, we will take this further. Our ambitions to limit taxes on the least well off are far from satisfied.

To succeed in this, we need constantly to review what we do in Government and how we do it. Government must make a first-rate job of protecting the citizen; - defending this country, upholding law and order. It must provide high quality education and health - and security for the old, the sick, and others who depend on our welfare system.

But we need reform even in these areas. Putting the front line first, getting the basics right, securing the best value for the taxpayer's money and applying good old-fashioned commonsense: these are the disciplines being applied in every part of government.

We live in a time of unprecedented social change. This throws up new problems. Government has a part to play in solving them. But it must recognise the limits on its wisdom and watch the unintended consequences of its action. Let me give an illustration. I have never hidden my ambition to extend nursery education, when the resources are available. But it would be destructive to enlarge it solely through LEAs and wreck private and voluntary provision. In all our policies, we must leave space for communities and voluntary associations. We must not let big government undermine the vitality of neighbourhood or family - stronger, more adaptable organisms than any structure the state may try to put in their place.

In welfare, for example, we need a system that reinforces people's efforts to be independent; and does not undermine them when they seek to improve their lives by their own efforts.

The state must not hold people down in a culture of dependency. Throughout the 1992 Election campaign, I repeatedly referred to the need to give a "hand up", not a "hand out". Since then, we have developed policies to provide that hand up. It is not enough to adopt these words as a slogan. You have to have the policies to make such aspirations a reality.

As a Social Security Minister in 1986 I helped Norman Fowler begin the reform of the social security system. We introduced Family Credit, which tackled the worst distortions of the poverty trap by the creative new device of assessing benefit on take-home pay. In the last Budget, the Chancellor enhanced this system for working parents.

The welfare system must complement the working of free and flexible labour markets. It is a job that offers the best hope of a secure route out of poverty. And thankfully, many new jobs are now being created.

Making it more attractive to hire people and more attractive to be hired will help cut into the bedrock of long-term unemployment. We need a more coherent approach to getting people back to work. So we are introducing a new Job Seeker's Allowance, which will stop people being shunted from pillar to post between two administrative systems. This will help the system to respond to the needs of those who are unemployed.

We are now looking at a range of ways of encouraging people back into jobs, coupled with tougher action on that small minority who make no reasonable effort to seek work.

The ownership revolution

Concern for the individual. The defence of private property. And the protection of the citizen against the power of the state. These have always been central objectives of Conservatism. The central objective of socialism, by contrast, has always been the pursuit of equality. Egalitarians find allocation more palatable than choice. They put uniformity before improvement. That means more power to the state and less to the individual. If they had believed in ownership, as we do, they would never have opposed council tenants' aspirations for home ownership - the biggest transfer of wealth and power from the state to the individual of the past 15 years.

When the housing market overheated and fell at the end of the 1980s, it claimed many victims amongst those who had bought at the peak of the boom. The collectivist Jeremiahs drew the wrong conclusion: not that Government must try harder to maintain a stable economy, but that home ownership was fool's gold. Out there in the real world, however, people still aspire to own their own home. There were more than half a million first-time buyers in 1993-94. Some 111,000 council tenants applied for the Right to Buy that year. Opinion surveys suggest that nearly three-quarters of people under 25 aspire to be home owners.

When I called for "the right to own" and "the power to choose" to be spread from the minority to the majority, I saw homes as only the first step. The corporatists, the collectivists, the central planners cannot cope with the notion of "popular capitalism". They resent other hands on the levers of power - most of all the "invisible hand" of the market. But the freedom represented by your own savings, your own income in retirement, are sources of independence I wish to see enjoyed throughout society.

It is beginning to happen. Pensioners' incomes from investments have more than doubled since 1979. For the newly retired, it has nearly trebled. More than half of all pensioners now have an occupational pension. As a result, their average income has risen by more than 50 per cent, ahead of inflation, since 1979.

But the savings habit is spreading wider. Since I introduced TESSAs only five years ago, a total of almost £21 1/2 billion has been invested in them; and there are currently just over 4 million TESSA accounts. The total invested in PEPS - over 4 1/2 million plans - now amounts to over £15 billion. Nearly 38 million people now have building society accounts. The amount held is almost £200 billion. There are over 60 million personal bank accounts, containing over£ 120 billion, while 8 million people have personal pensions. Well over 3 million people now run their own businesses. And there are today more shareholders - 10 million of them - than trade unionists.

Money widens choice. Low income tax rates widen choice. But there are other, more subtle, forms of ownership, too. I want people to have ownership of more of their lives, not just have things allocated as the state sees fit.

The Right to Buy gave choice in housing which over 1 1/2 million people have exercised. Parents in over 1,100 schools have voted for their school to be Grant-Maintained - unequivocally free to manage itself independent of the Town Hall. I want to see far more GM schools in the future. Parents now have a choice of schools; and we are relaxing the rules that used to prevent popular schools from expanding or good new schools coming into being.

But crucial to choice is information. Without knowing what is on offer, choice is meaningless. So we have launched an information explosion which I believe is irreversible. It may have worried many whose services can now be judged by their results. But such information meets the wishes of the public. It is here to stay - and to be developed further.

The public sector revolution

This ownership revolution requires a transformation in the way government conducts its business - an overhaul I signalled three years ago in the Citizen's Charter.

Concern for the individual as the user of public services: concern for the individual as taxpayer. These lay behind the privatisation programme which began in the 1980s. Today, the total number of major businesses returned to private ownership has reached 47. The total raised, to pay off public debt and finance future services, has topped £55 billion. it is hard to remember now that every privatisation was criticised at the time as "a bridge too far" - even the sale of British Telecom, whose customers have since enjoyed a 30 per cent fall in phone charges, and whose shareholders have enjoyed a threefold rise in the cash value of their investment. The pattern of greater efficiency and better customer services is repeated throughout privatised companies.

But there was a danger that those public services we believed should remain the responsibility of the state would be left behind by the stream of privatisation: that they would drift along, stagnant and second best. That was the challenge I faced: how to promote excellence in all parts of the public service - in our public education system, our National Health Service; and our social services. The Citizen's Charter was conceived as a programme, above all, for raising standards.

Just because the state remains responsible for ensuring a public service is provided, it does not mean that it should be deprived of the energies of private enterprise, the stimulus of the free market, or the clarity of independent regulation which have transformed privatised companies. The task for the 1990s was to find ways of applying these within the public sector. Today, as our reforms advance, the boundary between public and private is open country, which an enabling government can scour for the best ways of using limited taxpayer's money.

Five ways to break down boundaries

So let me outline five ways in which we are mapping out this new territory.

Second, we are bringing in private capital, to make better use of taxpayers' money, and introducing the skills of private enterprise into the public sector.

Third, we are bringing competition and choice into public services.

Fourth, we are devolving power within government itself.

And fifth, we are developing a "new accountability" - making public services respond more directly to the people who use them.

Let me say a little more about each of these in turn.

The new privatisations

First, there are still industries in public ownership which need to be revitalised by private enterprise and competition.

The focus today is on industries which had seemed doomed to be locked in the grip of the state forever. To liberate them we need to develop new ways of safeguarding their public service obligations. For example, whatever the outcome of our consultations on the Post Office, we will maintain a universal letter service, and a universal charge for delivery. We are now consulting on whether these obligations are best maintained by partial privatisation or by another route.

Another example is the privatisation of British Rail. Here competition is being introduced into many parts of the old monolith. But we will continue to provide subsidies for train operating companies which are uncommercial. And, at the same time, we will require all franchises to meet, as a minimum, the standards of service set out in BR's Passengers' Charter.

Private Finance

Second, we are finding new ways of engaging private capital, to make every pound of taxpayer's money go further. The City Challenge programme involves 1.2 billion of public spending. But its effects will be multiplied by the £3.6 billion contributed by private sector partners. In Wigan, challenge funding was the seedcorn whose harvest is 2,000 new homes, 5,000 new jobs; and 800 new businesses in derelict areas of industrial decline. In East London, Manchester, all our big cities, you can see the same thing. And we have extended the principle of challenge funding to the new Single Regeneration Budget, which will be the cornerstone of our future urban policies.

The private finance initiative offers even greater potential for change. It levers in private capital, shares risk with the private sector and brings in its management skills. It is showing that the taxpayer need not finance all our economic infrastructure. The Dartford Bridge and Channel Tunnel are already open. The new Ashford Passenger terminal, another private finance project, is already being built.

We hope to agree a contract for a new train service for London Underground's Northern Line by the end of the year, and contracts for the Channel Tunnel Rail Link and the West Coast Main Line by next summer. In the autumn, we will be going out to tender for the first four privately built, financed and operated roads. And tender documents are going out this week to five consortia bidding to build two privately-financed prisons. All these are projects which in the past would have had to be financed entirely by taxpayers - if they had ever seen the light of day at all.

Private finance involves complex issues. Sharing risk between public and private sectors is not simply a matter of splitting the difference. But to make the best use of limited capital spending, we need to make sure each and every government department is looking for ways to use private finance to supplement taxpayer resources.

I am not convinced that they are. We asked departments to prepare a list of projects suitable for private finance. We will shortly publish this. It will show up some gaps. Some departments face legal obstacles. Where these exist, we must remove them. But all departments need to know that, as the private finance initiative develops, Ministers will have to convince EDX - the Cabinet Committee which allocates public spending - that they have fully explored private finance options. I am determined to ensure that every service gains from this initiative.

Competition and Choice

Third, we are letting competition and choice into the public sector as a spur to efficiency. In health, we have separated the function of paying for care for the patient from providing care for the patient. The OECD recently described these reforms as giving Britain "one of the most sophisticated and effective means of allocating health resources." The results have been dramatic. Our hospitals are treating one million more patients a year.

Competition has a wonderful habit of concentrating the minds of those between whom a choice might be made. So we have also been inviting private companies to bid for government work. Nowadays, we are not just letting out contracts to maintain buildings and clean streets, but to do white collar work as well. For example, the Inland Revenue has signed a 10-year contract, worth £250 million, to have its IT support work done in the private sector. By May of this year, some £1.3 billion of central government activities had been "market-tested" under the Competing for Quality programme. On the results so far, average savings to the taxpayer from both "in-house" and outside bids have been of the order of 20 per cent. Tight control of running costs will mean that all Departments must continue to pursue such efficiency. That will be good for the quality of service and good for the taxpayer.

Taking decisions at the right level

Fourth, we want to push power away from the centre of government itself. In the Civil Service we have some of the best talent in Britain. We aim to exploit it better. This means giving departments more freedom to manage their own affairs, and separating out agencies so that they can be more responsive to their customers. We've taken this approach right down to the local level: liberating Grant-Maintained schools from political control, and giving fundholding GPs and hospital trusts the chance to set their own, local priorities.

Quality of government and quantity of government are two very different things. Unnecessary layers of government do more for bureaucracy than democracy. There is no such thing as an idle piece of government machinery. If it exists, someone will use it to spend money or regulate something - and probably both. I reject much of the mindless criticism of management we have seen. But it is clear, for example, that we do have too many layers of administration in the health service. Good managers have helped to deliver improved health care for millions of people. But we can simplify the structure and improve further. So one priority for the next parliamentary session is a Health Services Bill to axe the regional health authorities and thin out the alphabet soup by allowing DHAs and FHSAs to merge.

Sometimes we are told-that-you cannot have true accountability unless locally elected politicians monopolise all the local bodies involved in public services in their area. I do not share that view. I believe strongly in local government. But I want to encourage other members of the community to give their expertise, get involved and take on more responsibility.

At present, for example, not everyone who can contribute to better policing by serving on a police authority has the time or political inclination to serve as a magistrate or councillor. So our reforms will allow for an injection of other local talent: such as headteachers experienced in dealing with the drugs problem, farmers who can help in the fight against rural crime, business people who will ask hard questions about how the police use their resources.

As our reforms progress, they do, of course, sometimes create new pieces of machinery as well as removing old ones. But in a more transparent system there will be more accountability, because it will be clearer where the blame for the inevitable mistakes should lie. New managers have to accept that the price of their freedom is personal responsibility and pay linked to delivering their objectives. Whitehall, for its pan, has to accept that part of the price of liberating the energies and talents of local management is that it cannot control every decision in every hospital or every school. However, there are some in Whitehall, the Town Hall or some of the new agencies who find it hard to give up the degree of control they have traditionally exercised. Politicians and press often discourage them from doing so by scattering indiscriminate blame on them. The result, too often, is that those being charged with new responsibilities as local decision-takers are being snowed under by forms and circulars from the centre, as bureaucracy guards its back.

I do not want to see the new freedoms we have given to local schools and hospitals, for example, restricted by new red tape and regulation. I don't want to see another circular the length of a telephone directory, or to be told that it normally requires 14 forms to bring a simple prosecution against a shoplifter, who actually wishes to plead guilty. Of course, those who run local services must be accountable - but too many people seem to confuse accountability with bureaucracy. There is a difference - and I expect Ministers to be able to spot it.

And there's something else that I believe would help: circulars should spell out much more clearly the difference between a statutory obligation and recommended practices. I want all departments to make sure their circulars are produced in such a way that those reading them will be able to tell the limit of their statutory obligations without difficulty. This would go a long way to eliminating back door bureaucracy.

The listening service

Fifth, we have been making public services respond directly to the people who use them. Informing people is the first step - one too easily undervalued by people who are naturally articulate, have access to people in the system or simply don't use public services. I recall in the early days of the Citizen's Charter, a distinguished former mandarin belittling the idea of regular school reports. "Of course," he said, "all schools already send parents reports". Well, he was wrong. They should have done. But many didn't. They all do, now.

Published targets tell people what they are entitled to expect. Performance tables tell you when these obligations have been met. Under the Citizen's Charter, public services now publish information on the performance of individual schools, hospitals and police forces. By the end of December, every local authority will have published information - in their local newspapers - about their performance on everything from response times to 999 calls, to the time it takes to process your planning application. This is a revolution that the grand may belittle. But it is one by which the ordinary family is empowered. And the results of publishing targets are beginning to speak for themselves.

In 1989, before we published targets for waiting times for operations, 90,000 people were waiting over two years before they were treated. Today, no-one should be waiting over two years. Before we published punctuality targets for public transport, no-one knew if their local line was better or worse than the next one. Now they do. The result? Punctuality improved. How long you have to wait for an operation, for your train, for an ambulance: those aren't just dry statistics for the accountant and the experts. They are of vital interest to everyone.

Publishing more information may mean that the Government faces more criticism. That may seem a perverse reward for greater openness. But it is better to have things out in the open and face the criticism, rather than have things swept under the carpet. When you shine a spotlight into a dark corner you may not always like what you find. But that doesn't mean that you shouldn't shine the spotlight. You need to know if something is going wrong because that is the first step to putting it right.

We can no longer be expected to believe that every element of public service is doing as good a job as any other, or that the only way to improve services is to spend more money. The league tables recently published on hospital performance showed that for four routine operations - all of which were medically agreed to be suitable for day surgery - some hospitals were doing nearly all operations as day cases and some were doing none. League tables have forced into the open the question of why taxpayers' money goes further in some places than others. And I want no-one to be in any doubt that they are here to stay.

The new public sector

So the public sector is changing and will change further. In the future it will not only be smaller but less monolithic. We published a White Paper on the Civil Service just a fortnight ago. We aim to encourage the civil service to modernise and develop within a framework which maintains its traditional values of integrity and political impartiality. It will be unbundling the general task of administration into distinct, vital - and valued - skills: whether in framing policy, defining objectives, setting standards, articulating relationships between different parts of the system. purchasing services either in the open market or within government itself.

The relationship of departments with the providers of service - be they doctors, teachers or administrators - should become ever more transparent. Providers will come in all shapes and sizes - some still directly employed by the state, some on contract. The common factor should be that they will all have clearly-defined standards to meet, combined with management responsibility for how these are met.

And there will be another group of specialists with a duty to secure quality service for the public - the inspectors and regulators. Again, some of these may be outside the public sector itself, with their roles defined but not managed by the state.

OFSTED is just one example. This new body will secure, for the first time ever, systematic inspection and reporting on all Britain's 24,000 schools in the next four years. Once this cycle is completed OFSTED's work will continue, although I should expect it to focus in greater depth on those schools where results are covered up or found to be weakest. This new four-year cycle is a huge step forward. Previously, it would have taken HMl some 60 years to get round secondary schools, and 200 years round all primaries.

The way ahead

We will be legislating shortly to take these reforms further.

Our Pensions Bill is designed to give greater security, equality and choice. We will underpin occupational pensions with new protection against the possibility and the consequences of fraud. New age-related rebates will make personal pensions attractive across a broader age range. And, as a first step towards greater freedom in retirement, personal pension holders will be allowed to buy annuities at the time which suits them most.

We will be introducing greater freedom and choice by liberalising the law on Agricultural Tenancies. And we will be setting the legislative framework for the new Jobseeker's Allowance.

The bill to authorise the Channel Tunnel Rail Link will provide the framework for a massive private finance project. And by one means or another, we will be giving the Post Office new freedom to expand its services, here and abroad.

We will be thinning out the layers of management in the Health Service. And where appropriate we will be reducing the number of tiers in local government.

The fight against regulation is never won - but the successful passage of the Deregulation Bill will mean we have the option to repeal unnecessary legislation by secondary powers. This will greatly help our deregulatory campaign.

What we are seeing - and what I have described for you today - are far-reaching changes in the nature of Government. Britain's lead is again being imitated in many parts of the world. But behind the changing forms of Government, the principles of public service remain unchanged.

I expect my ministerial team to put government on the citizen's side: to control public spending, cut back on regulations, deliver on their Charter targets, listen to ordinary people and give them greater ownership of their own lives. I want government that devolves, that gives the citizen greater space to build communities which are not dominated by the state.

There are better ways of acting together than in a state-run collective, and you can find them in every city, town and village in this country. Local communities are a precious part of this country's inheritance. They are nourished by personal ownership, which increases people's sense of personal responsibility: you only have to look at the council homes people have bought if you want proof of that. They are supported by changes in public services of the kind I have described.

So the two revolutions therefore help to conserve what is best in this country: that is the very purpose of a Conservative government. And I believe government can do that best by delivering people the power to choose, the right to own, in a secure environment, a stable constitution and a strong economy.